Releases

WASHINGTON--(BUSINESS WIRE)--May 2, 2014--
Graham Holdings Company (NYSE: GHC) today reported income from
continuing operations attributable to common shares of $131.0 million
($17.65 per share) for the first quarter of 2014, compared to $21.7
million ($2.92 per share) for the first quarter of 2013. Net income
attributable to common shares was $132.1 million ($17.79 per share) for
the first quarter ended March 31, 2014, compared to $4.7 million ($0.64
per share) for the first quarter of last year. Net income includes $1.1
million ($0.14 per share) in income and $17.0 million ($2.28 per share)
in losses from discontinued operations for the first quarter of 2014 and
2013, respectively. (Refer to “Discontinued Operations” discussion
below.)

On April 11, 2014, the Company and Berkshire Hathaway Inc. announced
that they have signed an agreement for Berkshire to acquire a
wholly-owned subsidiary of the Company that includes, among other
things, WPLG, the Company's Miami-based television station. The
transaction is expected to close in the second or third quarter of 2014.
As a result, income from continuing operations excludes WPLG, which has
been reclassified to discontinued operations, net of tax, for all
periods presented.

The results for the first quarter of 2014 and 2013 were affected by a
number of items as described in the following paragraphs. Excluding
these items, income from continuing operations attributable to common
shares was $48.8 million ($6.47 per share) for the first quarter of
2014, compared to $30.8 million ($4.18 per share) for the first quarter
of 2013. (Refer to the Non-GAAP Financial Information schedule at the
end of this release for additional details.)

Items included in the Company’s income from continuing operations for
the first quarter of 2014:

$4.5 million in early retirement program expense at the corporate
office (after-tax impact of $2.9 million, or $0.39 per share);

$127.7 million gain on the sale of the corporate headquarters building
(after-tax impact of $81.8 million, or $11.13 per share); and

Revenue for the first quarter of 2014 was $840.6 million, up 2% from
$820.6 million in the first quarter of 2013. The Company reported
operating income of $79.5 million in the first quarter of 2014, compared
to $47.1 million in the first quarter of 2013. Revenues increased at the
television broadcasting and cable divisions, while revenues at the
education division were flat. Operating results improved in the first
quarter at the television broadcasting, cable and education divisions.

Division Results

Education

Education division revenue totaled $526.2 million for the first quarter
of 2014, essentially flat compared with revenue of $527.8 million for
the first quarter of 2013. Kaplan reported first quarter 2014 operating
income of $2.5 million, compared to an operating loss of $4.1 million in
the first quarter of 2013. Operating results for the first quarter of
2013 include restructuring costs of $9.4 million.

A summary of Kaplan’s operating results for the first quarter of 2014
compared to 2013 is as follows:

Three Months Ended

March 31

(in thousands)

2014

2013

% Change

Revenue

Higher education

$

253,779

$

271,860

(7

)

Test preparation

67,804

68,943

(2

)

Kaplan international

202,867

184,813

10

Kaplan corporate

2,014

2,604

(23

)

Intersegment elimination

(290

)

(405

)

—

$

526,174

$

527,815

0

Operating Income (Loss)

Higher education

$

13,144

$

5,101

—

Test preparation

(6,628

)

(4,345

)

(53

)

Kaplan international

10,882

6,397

70

Kaplan corporate

(12,632

)

(8,822

)

(43

)

Amortization of intangible assets

(2,288

)

(2,518

)

9

Intersegment elimination

44

131

—

$

2,522

$

(4,056

)

—

Kaplan Higher Education (KHE) includes Kaplan’s domestic postsecondary
education businesses, made up of fixed-facility colleges and online
postsecondary and career programs. KHE also includes the domestic
professional training and other continuing education businesses.

In 2012, KHE began implementing plans to close or merge 13 ground
campuses, consolidate other facilities and reduce its workforce. In
connection with these and other plans, KHE incurred $9.1 million in
restructuring costs in the first quarter of 2013, including accelerated
depreciation ($3.6 million), severance ($0.9 million), lease obligation
losses ($3.7 million) and other items ($0.9 million). At the end of
2013, the KHE campus closures or mergers had been largely completed,
though two campuses remain to be closed in the first half of 2014. In
April 2014, KHE announced plans to close two additional ground campuses
that will be completed by the end of 2015.

In the first quarter of 2014, KHE revenue declined 7% due largely to
declines in average enrollments that reflect weaker market demand over
the past year, lower average tuition and the impact of closed campuses.
KHE operating income increased in the first quarter of 2014 due largely
to expense reductions associated with lower enrollments and recent
restructuring efforts, as well as significant restructuring costs
recorded in the first quarter of 2013.

New student enrollments at KHE increased 7% in the first quarter of 2014
due to growth at Kaplan University, offset by the impact of closed
campuses.

Total students at March 31, 2014, were down 2% compared to March 31,
2013, but increased 9% compared to December 31, 2013. Excluding campuses
closed or planned for closure, total students at March 31, 2014, were
down 1% compared to March 31, 2013, but up 10% compared to December 31,
2013. A summary of student enrollments is as follows:

Excluding Campuses Closing

As of

As of

March 31,

December 31,

March 31,

March 31,

December 31,

March 31,

2014

2013

2013

2014

2013

2013

Kaplan University

47,109

42,816

45,788

47,109

42,816

45,788

Other Campuses

18,842

17,417

21,408

18,309

16,868

20,002

65,951

60,233

67,196

65,418

59,684

65,790

Kaplan University and Other Campuses’ enrollments at March 31, 2014 and
2013, by degree and certificate programs, are as follows:

As of March 31

2014

2013

Certificate

21.6

%

22.6

%

Associate’s

30.6

%

30.1

%

Bachelor’s

32.3

%

33.5

%

Master’s

15.5

%

13.8

%

100.0

%

100.0

%

Kaplan Test Preparation (KTP) includes Kaplan’s standardized test
preparation programs. KTP revenue declined 2% for the first quarter of
2014. Enrollment increased 2% for the first quarter of 2014 due to
growth in health and bar review programs, offset by declines in graduate
programs. KTP operating results declined in the first three months of
2014 due largely to decreased revenues.

Kaplan International includes English-language programs and
postsecondary education and professional training businesses largely
outside the United States. Kaplan International revenue increased 10% in
the first quarter of 2014 due to enrollment growth in the pathways
programs, English-language and Singapore higher education programs.
Kaplan International operating income improved in the first quarter of
2014 due to improved earnings in the pathways and English-language
programs.

Kaplan continues to evaluate its cost structure and may develop
additional restructuring plans in 2014.

Cable

Cable division revenue increased 2% in the first quarter of 2014 to
$203.9 million, from $200.1 million for the first quarter of 2013. The
revenue increase for the first three months of 2014 is due to growth of
the division's Internet and commercial sales revenues, recent rate
increases for many subscribers and a reduction in promotional discounts.
The increase was partially offset by a 2% decline in total customers and
a 4% decline in total PSUs, as the cable division continues to increase
its focus on high-value customers and decrease its focus on marginal
customers.

Cable division operating income grew 12% in the first quarter of 2014 to
$41.2 million, from $36.6 million in the first quarter of 2013. The
division’s operating income improved in the first three months of 2014
due to increased revenues and tight cost controls that resulted in a
small reduction in overall operating costs.

At March 31, 2014, total customers were down 2% and Primary Service
Units (PSUs) were down 4% due to a decline in video subscribers. A
summary of PSUs and total customers is as follows:

As of March 31

2014

2013

Video

524,563

588,180

High-speed data

484,168

463,726

Telephony

174,876

185,717

Total Primary Service Units (PSUs)

1,183,607

1,237,623

Total Customers

714,010

732,010

Television Broadcasting

Revenue at the television broadcasting division increased 24% to $85.7
million in the first quarter of 2014, from $68.9 million in the same
period of 2013; operating income for the first quarter of 2014 was up
52% to $44.4 million, from $29.1 million in the same period of 2013. The
increase in revenue and operating income is due to a $3.1 million
increase in political advertising revenue, $9.5 million in incremental
winter Olympics-related advertising revenue at the Company's NBC
affiliates and $4.7 million in increased retransmission revenues.

As discussed above, the television broadcasting operating results
exclude WPLG, the Company's Miami-based television station, which has
been reclassified to discontinued operations for all periods presented.

Other Businesses

Other businesses includes the operating results of The Slate Group and
Foreign Policy Group, which publish online and print magazines and
websites; SocialCode, a marketing solutions provider helping companies
with marketing on social-media platforms; Celtic Healthcare, a provider
of home health and hospice services; Forney, a global supplier of
products and systems that control and monitor combustion processes in
electric utility and industrial applications, acquired by the Company in
August 2013; and Trove, a digital team focused on emerging technologies
and new product development.

In April 2014, Celtic Healthcare acquired the assets of VNA-TIP
Healthcare of Bridgeton, MO. This acquisition will expand Celtic's home
health and hospice service areas from Pennsylvania and Maryland to the
Missouri and Illinois region.

Corporate Office

Corporate office includes the expenses of the Company’s corporate
office, the pension credit for the Company's traditional defined benefit
plan and certain obligations related to prior business dispositions. In
the first quarter of 2014, the corporate office implemented a Separation
Incentive Program that resulted in early retirement program expense of
$4.5 million, which will be funded from the assets of the Company
pension plan. Excluding early retirement program expense, the total
pension credit for the Company's traditional defined benefit plan was
$22.4 million and $9.2 million in the first quarter of 2014 and 2013,
respectively.

Equity in Earnings (Losses) of Affiliates

The Company holds a 16.5% interest in Classified Ventures, LLC and
interests in several other affiliates.

The Company’s equity in earnings of affiliates, net, was $4.1 million
for the first quarter of 2014, compared to $3.4 million for the first
quarter of 2013.

On April 1, 2014, the Company received a gross cash distribution of
approximately $95 million from Classified Ventures’ sale of
apartments.com. In connection with this sale, the Company will record a
pre-tax gain of approximately $92 million in the second quarter of 2014.

Other Non-Operating Income (Expense)

The Company recorded total other non-operating income, net, of $133.3
million for the first quarter of 2014, compared to expense of $4.1
million for the first quarter of 2013. The first quarter 2014
non-operating income, net, included a pre-tax $127.7 million gain on the
sale of the headquarters building, $5.0 million in unrealized foreign
currency gains and other items. The first quarter 2013 non-operating
expense, net, included $4.6 million in unrealized foreign currency
losses and other items.

Net Interest Expense

The Company incurred net interest expense of $8.2 million for the first
quarter of 2014, compared to $8.5 million for the first quarter of 2013.
At March 31, 2014, the Company had $452.5 million in borrowings
outstanding at an average interest rate of 7.0%.

Provision for Income Taxes

The effective tax rate for income from continuing operations for the
first quarter of 2014 was 37.1%, compared to 41.5% for the first quarter
of 2013. The higher effective tax rate in 2013 results mostly from
losses in Australia for which no tax benefit is recorded.

Discontinued Operations

On April 11, 2014, the Company and Berkshire Hathaway Inc. announced
that they have signed an agreement for Berkshire to acquire a
wholly-owned subsidiary of the Company that includes WPLG, the Company's
Miami-based television station, a number of Berkshire shares currently
held by the Company and cash in exchange for approximately 1.6 million
shares of Graham Holdings Class B common stock currently owned by
Berkshire. The transaction is expected to close in the second or third
quarter of 2014. As a result, income from continuing operations excludes
WPLG, which has been reclassified to discontinued operations, net of
tax, for all periods presented.

The specific number of shares of each company and the amount of cash
will be determined on the closing date based on certain factors,
including the market prices of the shares of both companies at that
time. The transaction is subject to FCC approval and other customary
conditions. In addition, there are certain termination rights relating
to minimum trading prices of the stock of each company immediately prior
to closing and to a minimum value of the television station for purposes
of the transaction on the closing date.

Earnings (Loss) Per Share

The calculation of diluted earnings per share for the first quarter of
2014 was based on 7,352,230 weighted average shares outstanding,
compared to 7,266,284 for the first quarter of 2013. At March 31, 2014,
there were 7,401,499 shares outstanding and the Company had remaining
authorization from the Board of Directors to purchase up to 159,219
shares of Class B common stock.

Forward-Looking Statements

This report contains certain forward-looking statements that are based
largely on the Company’s current expectations. Forward-looking
statements are subject to certain risks and uncertainties that could
cause actual results and achievements to differ materially from those
expressed in the forward-looking statements. For more information about
these forward-looking statements and related risks, please refer to the
section titled “Forward-Looking Statements” in Part I of the Company’s
Annual Report on Form 10-K.

GRAHAM HOLDINGS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

March 31

%

(in thousands, except per share amounts)

2014

2013

Change

Operating revenues

$

840,561

$

820,592

2

Operating expenses

704,706

710,769

(1

)

Depreciation of property, plant and equipment

53,245

58,959

(10

)

Amortization of intangible assets

3,081

3,717

(17

)

Operating income

79,529

47,147

69

Equity in earnings of affiliates, net

4,052

3,418

19

Interest income

599

510

17

Interest expense

(8,820

)

(8,960

)

(2

)

Other income (expense), net

133,273

(4,083

)

—

Income from continuing operations before income taxes

208,633

38,032

—

Provision for income taxes

77,400

15,800

—

Income from continuing operations

131,233

22,232

—

Income (loss) from discontinued operations, net of tax

1,072

(16,973

)

—

Net income

132,305

5,259

—

Net loss (income) attributable to noncontrolling interests

219

(97

)

—

Net income attributable to Graham Holdings Company

132,524

5,162

—

Redeemable preferred stock dividends

(426

)

(444

)

(4

)

Net Income Attributable to Graham Holdings Company Common
Stockholders

$

132,098

$

4,718

—

Amounts Attributable to Graham Holdings Company Common
Stockholders

Income from continuing operations

$

131,026

$

21,691

—

Income (loss) from discontinued operations, net of tax

1,072

(16,973

)

—

Net income

$

132,098

$

4,718

—

Per Share Information Attributable to Graham Holdings Company
Common Stockholders

Basic income per common share from continuing operations

$

17.71

$

2.92

—

Basic income (loss) per common share from discontinued operations

0.14

(2.28

)

—

Basic net income per common share

$

17.85

$

0.64

—

Basic average number of common shares outstanding

7,275

7,227

Diluted income per common share from continuing operations

$

17.65

$

2.92

—

Diluted income (loss) per common share from discontinued operations

0.14

(2.28

)

—

Diluted net income per common share

$

17.79

$

0.64

—

Diluted average number of common shares outstanding

7,352

7,266

GRAHAM HOLDINGS COMPANY

BUSINESS SEGMENT INFORMATION

(Unaudited)

Three Months Ended

March 31

%

(in thousands)

2014

2013

Change

Operating Revenues

Education

$

526,174

$

527,815

0

Cable

203,921

200,138

2

Television broadcasting

85,651

68,902

24

Other businesses

24,913

23,814

5

Corporate office

—

—

—

Intersegment elimination

(98

)

(77

)

—

$

840,561

$

820,592

2

Operating Expenses

Education

$

523,652

$

531,871

(2

)

Cable

162,759

163,525

0

Television broadcasting

41,265

39,791

4

Other businesses

35,660

32,356

10

Corporate office

(2,206

)

5,979

—

Intersegment elimination

(98

)

(77

)

—

$

761,032

$

773,445

(2

)

Operating Income (Loss)

Education

$

2,522

$

(4,056

)

—

Cable

41,162

36,613

12

Television broadcasting

44,386

29,111

52

Other businesses

(10,747

)

(8,542

)

(26

)

Corporate office

2,206

(5,979

)

—

$

79,529

$

47,147

69

Depreciation

Education

$

16,444

$

22,588

(27

)

Cable

33,787

33,733

0

Television broadcasting

1,994

2,209

(10

)

Other businesses

520

429

21

Corporate office

500

—

—

$

53,245

$

58,959

(10

)

Amortization of Intangible Assets

Education

$

2,288

$

2,518

(9

)

Cable

35

50

(30

)

Television broadcasting

—

—

—

Other businesses

758

1,149

(34

)

Corporate office

—

—

—

$

3,081

$

3,717

(17

)

Pension Expense (Credit)

Education

$

4,143

$

4,106

1

Cable

864

882

(2

)

Television broadcasting

320

1,344

(76

)

Other businesses

164

116

41

Corporate office

(17,679

)

(9,121

)

94

$

(12,188

)

$

(2,673

)

—

GRAHAM HOLDINGS COMPANY

EDUCATION DIVISION INFORMATION

(Unaudited)

Three Months Ended

March 31

%

(in thousands)

2014

2013

Change

Operating Revenues

Higher education

$

253,779

$

271,860

(7

)

Test preparation

67,804

68,943

(2

)

Kaplan international

202,867

184,813

10

Kaplan corporate

2,014

2,604

(23

)

Intersegment elimination

(290

)

(405

)

—

$

526,174

$

527,815

0

Operating Expenses

Higher education

$

240,635

$

266,759

(10

)

Test preparation

74,432

73,288

2

Kaplan international

191,985

178,416

8

Kaplan corporate

14,646

11,426

28

Amortization of intangible assets

2,288

2,518

(9

)

Intersegment elimination

(334

)

(536

)

—

$

523,652

$

531,871

(2

)

Operating Income (Loss)

Higher education

$

13,144

$

5,101

—

Test preparation

(6,628

)

(4,345

)

(53

)

Kaplan international

10,882

6,397

70

Kaplan corporate

(12,632

)

(8,822

)

(43

)

Amortization of intangible assets

(2,288

)

(2,518

)

9

Intersegment elimination

44

131

—

$

2,522

$

(4,056

)

—

Depreciation

Higher education

$

7,740

$

13,439

(42

)

Test preparation

3,784

4,758

(20

)

Kaplan international

4,708

3,996

18

Kaplan corporate

212

395

(46

)

$

16,444

$

22,588

(27

)

Pension Expense

Higher education

$

2,628

$

2,807

(6

)

Test preparation

722

640

13

Kaplan international

89

87

2

Kaplan corporate

704

572

23

$

4,143

$

4,106

1

NON-GAAP FINANCIAL INFORMATION

GRAHAM HOLDINGS COMPANY

(Unaudited)

In addition to the results reported in accordance with accounting
principles generally accepted in the United States (GAAP) included in
this press release, the Company has provided information regarding
income from continuing operations, excluding certain items described
below, reconciled to the most directly comparable GAAP measures.
Management believes these non-GAAP measures, when read in conjunction
with the Company‘s GAAP financials, provide useful information to
investors by offering:

the ability to make meaningful period-to-period comparisons of the
Company’s ongoing results;

the ability to identify trends in the Company’s underlying business;
and

a better understanding of how management plans and measures the
Company’s underlying business.

Income from continuing operations, excluding certain items, should not
be considered substitutes or alternatives to computations calculated in
accordance with and required by GAAP. These non-GAAP financial measures
should be read only in conjunction with financial information presented
on a GAAP basis.

The following table reconciles the non-GAAP financial measures to the
most directly comparable GAAP measures:

Three Months Ended

March 31

(in thousands, except per share amounts)

2014

2013

Amounts attributable to Graham Holdings Company common
stockholders

Income from continuing operations, as reported

$

131,026

$

21,691

Adjustments:

Early retirement, severance and restructuring charges

2,878

6,140

Sale of headquarters building

(81,836

)

—

Foreign currency (gain) loss

(3,229

)

2,953

Income from continuing operations, adjusted (non-GAAP)

$

48,839

$

30,784

Per share information attributable to Graham Holdings Company
common stockholders

Diluted income per common share from continuing operations, as
reported

$

17.65

$

2.92

Adjustments:

Early retirement, severance and restructuring charges

0.39

0.85

Sale of headquarters building

(11.13

)

—

Foreign currency (gain) loss

(0.44

)

0.41

Diluted income per common share from continuing operations, adjusted
(non-GAAP)

$

6.47

$

4.18

The adjusted diluted per share amounts may not compute due to
rounding.